Ultimate Butter Popcorn issues 6%, 15-year bonds with a face amount of $42,000. The market interest rate for bonds of similar risk and maturity is 5%. Interest is paid semiannually.
At what price will the bonds issue? (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Do not round interest rate factors. Round "Market interest rate" to 1 decimal place.)
Issue price of the Bond = $46,395 (Rounded)
Face amount =$42,000
Interest Rate = 3% [ = 6%/2, Since Semi Annually ]
Interest payment = $1,260 [ $42,000 x 3% ]
Market interest rate = 2.5% [ = 5%/2, Since Semi Annually ]
Periods to maturity = 30 Years [ 15 Years x 2 ]
Issue price of the Bond
= Present Value of Interest + Present Value of Face Value
=$1260 x (PVAF 2.5%, 30 Years ) + $42,000 x (PVF 2.5%, 30 Years)
= [ $1260 x 20.93029 ] + [ $42,000 x 0.47674 ]
= $20,023.08 + 26372.16
= $46,395 (Rounded)
Get Answers For Free
Most questions answered within 1 hours.